Performance principles maximize value when they guide the formation of Lean Office value streams. Take for example an order processing value stream. Assume the value priorities for order processing is to create a buying experience that maximizes customer satisfaction, while also minimizing the cycle time to recognize the revenue. Value priorities do not provide guidelines for how this is to be accomplished. That is the purpose of performance principles.

An example of a performance principle in the order processing scenario could be "We will accept changes to any customer order up until the time it is shipped." This principle focuses on the buying experience and makes clear what could otherwise be a source of confusion within the order entry department. Every activity of the value stream can now be optimized to help insure this principle is fulfilled. Without this principle each activity owner of the value stream could interpret maximizing the customer buying experience in a different way - leading to an inconsistent and disjointed buying experience.

Whether or not management has formally identified performance principles they already exist in the organization. Every individual uses performance principles as guidelines for decision making. Without a formal set, performance principles are adopted informally from:

• This is the way we have always done it
• This is what my (manager, customer, friend) told me yesterday
• This is the best thing for (the company, the customer, me)
• This is what they do at (Wall-Mart, Dell, Southwest Airlines)

It is not the lack of performance principles that hurts most organizations. It is the vast number of them shared unequally by many different stakeholders that causes conflicts in every day decision making. Is a new or existing customer more important? Who owns the customer? When is it appropriate to say no to a customer? Any one answer to these questions is probably OK. Having key individuals in the organization competing with conflicting answers to these questions can be disastrous.

The prerequisites for developing performance principles are mission, vision. and value statements. These serve to set the tone of the organization, where it is going, and how it is going to get there. Performance principles form the link between these statements of value and the tactical day-to-day. If mission, vision, and value statements are missing or fail to cover the current strategy of the entire organization, they must be updated prior to developing performance principles.

Value statements by definition apply to the entire organization. Performance principles can be developed as part of a hierarchical model. Value statements say what, performance principles say how. The how can be different based on the segment or level of the organization they are applied. Performance principles can be developed once for the entire organization. Or they can be developed both at a corporate level and a departmental level. In the latter example, certain corporate principles might still apply at the department, and others may be different for each. This makes sense because the how at the corporate level can be different than the how for human resources or customer service.

Performance principles are developed for each value statement. If an organization has 7-10 value statements, performance principles would be developed indicating how that value is to be realized. There is no formula for the number of performance principles per value statement. It's generally a good idea to not have more than 7-10. If it appears more are needed then the principles may be a too low a level or the value statement needs to be split into two statements.

The preferred approach to developing performance principles is to do it with all of the key stakeholders in the room. A facilitated brainstorming session works the best. Engaging in a discussion about how the organization is going to achieve its values can sometimes be very lively. An independent facilitator can maintain everyone's involvement while insuring the discussion remains focused on developing a working principle.